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Can Woz Help Build Fusion-io Into the Next Apple?

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Sales are picking up at recently public start-up Fusion-io (NYSE: FIO  ) . The company has even attracted the interest of Apple co-founder Steve Wozniak, who's served as the company's Chief Scientist since 2008. After a successful IPO in June, the stock nearly touched $37, almost twice its offering price of $19. While the company has given some value back, as of today it sits at $29 per share -- still a nice return for early investors.

Fusion-io has pioneered a new storage memory platform called shared data decentralization. By moving data closer to the CPU that processes it, the new design makes chips faster and more efficient. Hopefully, this technology's disruptive potential doesn't simply turn out to be a myth.

Big players already inhabit the competitive storage sector, and they're all trying to get more of the pie for themselves. Incumbents include solid-state drive (SSD) providers, like Western Digital (NYSE: WDC  ) , STEC (Nasdaq: STEC  ) , and SanDisk (Nasdaq: SNDK  ) , as well as traditional data storage providers, like EMC Corporation (NYSE: EMC  ) and NetApp (Nasdaq: NTAP  ) . These companies probably won't take kindly to gatecrashers like Fusion-io and OCZ Technology Group (Nasdaq: OCZ  ) .

The company recently reported impressive fiscal 2011 results, including its first-ever profits. Despite healthy gross margins, heavy marketing and R&D expenses kept Fusion-io in the red until this year. Bear in mind that those are fairly common growing pains for any tech company. Revenue for FY2011 rose 445%, from $36.2 million to $197.2 million for the year.

Note: Figures reported on a GAAP basis.

You've probably heard of a couple of Fusion-io's biggest customers: Facebook and Apple. Facebook alone accounted for 47% of revenue in the first three quarters. Having such powerful custome rs is a double-edged sword: They lend the company's technology validity, but exert big-time bargaining power as buyers. Fusion-io expected sales to Facebook to drop this last quarter as it completed its planned deployments, so it's critical for the company to spread the word of its own merits to potential new customers. (Cue marketing expenses.)

Fusion-io is a pretty risky investment; it just became profitable, yet it already boasts a $3.2 billion valuation. However, I like the odds that this disrupter will shake things up in storage memory platforms. I'll be keeping an eye on this stock,  and I might just pick up shares amid the market's recent weakness.

Fool contributor Evan Niu owns shares of Apple. Click here to see his holdings and a short bio. The Motley Fool owns shares of Western Digital, EMC, and Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On August 12, 2011, at 3:50 AM, oceansky99 wrote:

    Asking if if they can build something like fusion io into the next mac is nearly pointless because for several reasons. First Apple is a deceptive company that gives the illusion that they are leaders in technology. When in reality, they are often behind the curve in many products, and especially their desktops. A fine example of this is when I got an i7 based PC more than a solid year before Apple even talked about i7.

    At the time my pc could render video, something that macs should excel at, and run studio software etc at more than twice the rate of their typical $1700 core2duo slow imacs. And my system was only $700. The mac fans would argue that the apple hardware was built of gold by Woz in his garage, but I don't see how three year old, dinosaur core2duo technology could ever be regarded as anything but slow and inferior. They could try to argue about the os, but it's becoming pretty obvious that tons of people have no problems with windows 7 or even other iterations.

    Basically after a long wait, Apple brought a slower version of the i7 to imac and upped the price to $2000. I don't see how anyone, wanting to accomplish anything would want to pay more than twice for that. And it still isn't as fast as my pc And if I really wanted to get going I could spend $1400 for two PC's, each faster than their current imac costing two grand. Thus leaving it so far in the dust, it's not even funny. How is that the being in the lead?

    Even if Woz succeeds with the fusion and so on, the computer itself will be hampered by it's other hardware shortcomings. And it before it ever got off the ground, there would just be some newer PC that would obliterate it on multiple fronts. I guess they could slap a pretty iFusion on the front, gloss up the white a bit on the case, increase the monitor to 32 inches so it's more like an HD TV since most mac users confusing purchasing a computer with buying a TV. And then maybe it could sell some. Sorry. I'm just not too impressed. And I've run a studio for 25 years and never been made more productive by any mac. If anything I would probably notice my wallet getting lighter.

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